SBA Answers Questions About Capital

This month, the Small Business Administration’s Office of Advocacy responded to some frequently asked questions about small businesses (defined as businesses with zero to 499 employees) and accessing startup capital. If you haven’t seen it already, check it out; if you’ve just started or are about to start a company, it can be invaluable know a bit about how businesses are gaining access to capital and the avenues where they are succeeding.

Here’s some highlights from the SBA’s responses:

1. Borrowing conditions are getting better. For some small businesses, securing a traditional loan can be difficult. Thankfully, though borrowing still isn’t as easy as it was before the recession hit, banks and credit unions are relaxing on their loan terms and conditions, meaning more startup businesses will be able to get the funding that they need. For more information on traditional loans, see here.

2. More businesses are seeking loans. Since 2008, it’s always encouraging to see indicators of economic growth, and we’re particularly excited about this one. In 2013, small businesses borrowed approximately $1 trillion from banks, credit unions, angel investors, venture capitalists, and other financial institutions. Though there is some conflicting information about how much startup capital businesses need, the SBA estimates it’s between $10,000 and $80,000 per business– that’s a lot of businesses taking out loans to reach $1 trillion.

3. Alternative loans are becoming more widespread. In 2012, about 50% of all funding for small businesses came from banks or credit unions, but about 36% came from other financial institutions (not including venture capital firms or angel investors). We love to see business owners finding ways to gain capital even without some of the qualifications necessary for traditional loans. That’s the beauty of what we get to do: show business owners that they can still achieve their goals even if their companies don’t look quite perfect on paper yet. To learn more about what alternative loans are and how they work, look here.

The SBA’s responses to their frequently asked questions indicate that business owners can and do get loans, even when they think they may not qualify. For more information about gaining access to capital, check out the resource tab above.